Maruzen CHI Holdings Co., Ltd.

The selling prices of imported books and foreign magazines are set in line with foreign exchange fluctuations, and a sharp, sudden change in exchange rates over a short period raises concerns about an impact on earnings. The Group seeks to reduce this risk by using yen-denominated transactions and forward exchange contracts in procurement, but complete elimination is difficult, and the Group recognizes that this risk may materialize at any time.

Risks such as computer viruses, information system failures, and personal data leakage are increasing, and if an incident occurs, it may lead to a decline in revenue due to loss of credibility and unexpected expenses such as damages, affecting business activities. The Group recognizes that this risk may materialize at any time, and positions information security and personal data protection as one of its most important management issues, working on system and data maintenance and management through strengthening its organizational structure and employee training.

If a large-scale disaster such as a major earthquake, tsunami, typhoon, or flood occurs, it may have a significant impact on performance due to suspension of business activities or damage to and reduced functionality of social infrastructure, and the Group recognizes that this risk may materialize at any time. The Group has implemented measures such as fire prevention and earthquake resistance measures at major facilities, housing computer systems in buildings with earthquake-resistant structures and private power generation equipment, data backup, and risk transfer through various types of insurance.

The Group sells books and undertakes library operation services for the public library, school library, and education/academic markets, and its performance is affected by budget trends of government agencies and universities. If budgets are reduced due to policies of the national government or local governments, or subsidy support policies of the Ministry of Education, Culture, Sports, Science and Technology, this could lead to intensified order competition beyond expectations. As a countermeasure, the Group continuously monitors market trends.

In the store and online sales business, changes in consumption trends due to climatic and economic conditions, competitors' store openings, and other factors may affect earnings. The book retail market has a severe competitive environment and is highly sensitive to changes in the external environment. No specific countermeasure is stated in the securities report.

The publications sold by the Group are subject to the resale price maintenance system under Article 23, Paragraph 4 of the Antimonopoly Act, which allows fixed-price sales. The Fair Trade Commission concluded in 2001 that the system would remain in place for the time being, but if the resale price maintenance system is abolished in the future, or depending on the expansion of e-books, this could affect performance. The Group closely monitors trends in discussions concerning laws, regulations, and systems.

In the publishing business, the Group adopts a consignment sales system in accordance with industry customary practice, accepting returns under new title consignment (consignment period of 6 months), long-term consignment (up to 12 months), and monthly magazines (3 months), among others. Fluctuations in the return rate directly affect net sales and cost of sales, and may influence business performance. While the Group addresses this in its accounting through recognition of refund liabilities and return assets, it continues to closely monitor the risk of fluctuations in return rates.

If a global outbreak of a novel infectious disease such as COVID-19 or a new strain of influenza causes a suspension of business activities or a transformation in lifestyles, it could have a significant impact on the Group's business activities and performance. As a countermeasure, the Group has thoroughly implemented infection prevention measures and introduced a telework system, taking steps to prevent infection among stakeholders both within and outside the Group.